Sallie Gets a Mr. Fix-It
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The damage at Sallie Mae, the nation's biggest student lender, is so great that the company is calling in the banking industry's Mr. Fix-It. And that might be the prelude to an eventual sale.
Shares of Sallie Mae surged 15 percent after the company announced that Anthony Terracciano has been named chairman of the board. The former chairman, Albert Lord, who contributed to the company's damage during a bizarrely belligerent conference call with analysts last month, remains chief executive.
The appointment of a new chairman may also signal the start of trying to sell the company again, after a buyout effort led by J.C. Flowers collapsed amid much finger-pointing. For Terracciano has an enviable record of helping to fix banks that are then sold at rich premiums. He was brought in as chairman of Dime Bancorp in 2000, when the New York savings bank was trying to fend off a bid from North Fork Bancorp. The defense succeeded, and a year later Dime was sold to Washington Mutual for $5 billion-more than double the North Fork offer.
Terracciano was named to the board of Riggs National in 2004, just weeks before the Washington bank put itself up for sale. It was eventually acquired by PNC Financial Services Group.
He was chairman and chief executive of First Fidelity Bancorp before the New Jersey bank was sold to First Union (now Wachovia) for $5.4 billion-a 33 percent premium over its stock price at the time.
More recently, he was hired by activist shareholder Relational Investors, which was ultimately successful in pressing for the ouster of Sovereign Bancorp's chief executive, Jay Sidhu.
Shares of Sallie Mae, formally known as SLM, have been down nearly 70 percent over the last six months, as the company struggles with the credit crunch and with sharp cuts in government loan subsidies. The company may not have hit bottom yet. But if a financial institution wants to get into the student loan business for the long term, Sallie is still the dominant player.
In any case, investors should be more confident about the company's future with Terracciano on board. As for Lord, his days as C.E.O. may still be numbered. But it is certain we will never get a performance quite like last month's call, when Lord answered an analyst's question about the securitization of student loans by telling him to call Steve McGarry in investor relations:
Analyst: But you're the C.E.O. You're the guy who just took over the company.
Albert Lord: Yes, that's exactly right. I'm the C.E.O. You should give Steve a call. Next question.